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Lawbite: Is your lease at risk with AirBnB style short term lets?

Where the tenant under a long lease covenanted to use the property as a “private residence/dwelling”, the granting of a series of short term lettings was found to be a breach of those obligations.

The tenant, Nemcova, paid Council tax and utility bills but recently only occupied the property for 75% of the year due to feeling intimidated by her neighbours. The flat had however been occupied for approximately 90 days in total over the last year on 7 short term lettings.

The lease was found to have no restrictions on underletting, assigning or parting with possession of the whole of the flat and the obligation to use as a (rather than “the”) private residence meant that it did not need to be Nemcova’s only or main home. It could also remain a private residence if it was occupied by Nemcova, her tenant or a friend allowed to live rent free.

However the Court found that the covenant did require that there should be a connection between the occupier and the residence such that the occupier would think of it as his or her residence. The duration of occupation was material and there must be a degree of permanence going beyond being there for a weekend of few night in a week. Occupation for a matter of days was too transient.

The Upper Tribunal held that the granting of these short term lettings was therefore a breach of the user covenant. If the lease in question contains forfeiture provisions this could be the prelude to the landlord obtaining possession via forfeiture of the lease pursuant to section 168(4) of the Commonhold and Leasehold Reform Act 2002 if it so wished.

Key points

Those letting on AirBnB style platforms will want to check the terms of their leases to ensure that they are not likewise potentially in breach. It is not only the provisions relating to the rights to underlet or those prohibiting business use which are relevant. The same applies to any lender’s term which may be broken as a consequence of such breaches.

Having said this, emphasis was made in the Judgment to the need to construe the relevant words used in their particular, fact-specific context. In that respect, although it also found for the landlord, the Upper Tribunal commented that it felt that the First Tier Tribunal had given too much weight to the decisions referred to it rather than to the context of the lease in question.